Wi-Fi Is Hot But Users Still Warming to It

Most online consumers are aware of public wireless Internet access hotspots , but only 6 percent have used the service in a public place, according to a report released this week by Jupiter Research. As a result, it said hotspot providers will have to expand their search for initial return on investment beyond cold cash from consumers.

The report, entitled "Public Hotspots: Who Will Make Money," said businesses operating public Wireless Fidelity (Wi-Fi) hotspots will have to look beyond pure consumer revenues to internal productivity gains and third-party revenues for positive returns on their investments.

At a time when public hotspots are sprouting like weeds, the research report found limited adoption among segments of the business population as part of its study regarding who is positioned to make money with the technology.

Jupiter's Julie Ask, the lead author on the report, explained that while more than 70 percent of online consumers surveyed were aware of public hotspots, the study found that fewer than 1 percent had paid to use one in a public place.

"Realistically, this market really hasn't taken off at all," Ask told internetnews.com. (Jupiter Research and this publication are owned by the same parent company.)

Ask noted that only 15 percent of the 2,835 survey participants reported that they actually have used wireless high-speed Internet access of any kind -- a statistic she attributed to a lack of marketing targeted toward general consumers.

But the report also said public Wi-Fi can find a viable business model, eventually. "There's been a lot of hype around this technology and people will begin to use it soon enough, but it's still a nascent market that needs to grow," she said.

In her research, Ask determined that both awareness and usage of public hotspots are skewed toward upper-income individuals earning more than $100,000 annually, with 15 percent of individuals reporting they had used a public hotspot and 83 percent reporting awareness of such spots.

The report also noted that of the 6 percent of respondents who reported that they have used Wi-Fi in a public place, 3 percent said they paid for it indirectly through a connection at a hotel or airport. These numbers are "a sign the service offers marginal utility to the bulk of the population today," according to the report. But don't be fooled by the paltry numbers so early in the rollout of publicly-available Wi-Fi Internet access.

"With 11 percent of travelers paying $150 to $200 monthly in telecom bills, and 8 percent paying $200 or more, a $30 per month fee adds only 20 percent or less to many of these bills," the report continued. "These figures indicate that the travel segment could be a lucrative money-making area for this industry at minimal cost to users and the companies who pay their bills."

The report adds more data to the growing body of research about whether public Wi-Fi hotspots are sustainable financially. During last year's 802.11 Planet Conference in Philadelphia, analysts asked the same question to no avail.

Indeed, Yankee Group analyst Adam Zawel said that even with experts forecasting the number of hotspot subscribers growing to 400,000 by 2006, the economics of the industry are still difficult to measure.

Other findings in the latest Jupiter research about the potential for Wireless Internet Service Providers (WISPs) include the following:

Twenty percent of online users spend up to 25 percent of their time working away from their homes or primary offices, offering WISPs a small, but potentially lucrative opportunity.

While 13 percent of respondents said they would be willing to pay for wireless access through a public hotspot, only four percent of consumers reported they were willing to pay a WISP directly, indicating that hotspots will not survive as stand-along businesses except on the small-scale.

Because of high setup costs and pre-existing consumer habits, only those service providers who leverage existing assets to offer Wi-Fi as part of a bundled offering will make money on public hotpots.

Ask emphasized that whether these existing assets are backhaul infrastructure or corporate contracts for remote connectivity services, those companies who diversify their offerings to include wireless Internet access with a variety of other products will come out on top. As such, she concluded, hotspot operators must look beyond pure consumer revenues from public access to enterprise investments for a positive return on investment overall.